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In: Accounting

Firm A uses a process-costing system. For September 2020, the company had the following activities: Beginning...

Firm A uses a process-costing system. For September 2020, the company had the following activities:

Beginning work-in-process inventory 7,000 units
      Units placed in production, current 23,000 units
      Good units completed   25,000 units
      Ending work-in-process inventory 2,000 units
      Direct material costs, beginning $3,000
      Conversion costs, beginning $2,000
      Direct material costs, current $30,000
      Conversion costs, current    $10,000

Direct materials are placed into production at the beginning of the process. Beginning WIP is 100% complete as to direct materials and 30% complete as to conversion. All spoilage is detected at the end of the process. Normally, spoiled units are 10% of good units completed. Ending WIP is 60% completed as to conversion and 100% complete as to direct materials. The company decides to use the first-in, first-out (FIFO) method.

(26-1) Compute the physical units of normal spoilage and started and completed during current period. Then compute equivalent units for direct materials and conversion costs. (12 points)

(26-2) Summarize costs to account for and calculate cost per equivalent-unit for direct materials and conversion costs (Round cost per equivalent-unit calculations to the nearest hundredth). (4 points)

(26-3) Assign total costs (7 points)

(26-4) Calculate cost per good unit completed and normal spoilage rate. (4 points)

(26-5) Please briefly describe how does the job-costing system account for spoilage. (3 points)

(26-6) Please briefly explain why do we split completed units into completed units from beginning WIP and completed units from started and completed in current period under FIFO? (3 points)

Solutions

Expert Solution

Solution:

1

Started and Completed = Completed Good Units - Begining WIP = 25000 - 7000 = 18000

Normal Spoilage = 25000*10% = 2500 units

Abnormal Spoilage = Total Units - (Completed Units+Ending WIP+Normal Spoilage) = 500 units

2.

3.

4.

Cost per good units = 41112/25000 = $1.64

Normal Spoilage Rate = 4183/2500 = $1.67

PS: Dear student, kindly split up questions having multiple requirements. You can post 4 requirements per post. The first four is done for you. For any clarifications kindly use the comment box

ekkarill92 answered 1 year ago
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